TIP SHEET: Montgomery Manager Sees Value In Shorts, Longs
By DONNA FUSCALDO
Of DOW JONES NEWSWIRES
NEW YORK -- Despite the dot-com bust that sent many Internet companies packing, Chetan Joglekar, money manager for the Montgomery Global Long-Short Fund, sees some opportunities to make money. That's why he's bullish on ebay Inc. (EBAY), for instance.
"It's pretty obvious it's the world leader in the auction market," he said. Ebay is increasing market share and revenue while its earnings-per-share grows, he added.
The Montgomery Global Long-Short Fund, formed in early 1998 and comprised of long and short positions in companies around the world, is designed to pad investors during market swings. "It gives upside when the market goes up and downside protection in a bear market," he said.
The $57 million fund is down 5.45% year-to-date. It was down 22% in 2001.
Shorting a stock is an investment strategy in which investors bet the share price will fall. Often they will sell borrowed stocks hoping to buy it back later at a cheaper price. Longing a stock, on the other hand, is a bet the share price will go higher.
Another company that Joglekar likes is Costco Wholesale Corp. (COST), which he said is attractive, especially in a slowing economy. The Issaquah, Wash., warehouse retailer's "products are phenomenal and has prices you can't beat," he noted. The stock recently traded around $42, just below its year high of $46.90 reached Feb. 21.
Considering that the fund is concentrated in stocks from around the world, Joglekar also has a favorite in Samsung Electronics Co. (Q.SSE) of South Korea.
Samsung is a leader in dynamic random access memory or DRAM chips and is also a leader in flat panel screens, said the money manager. In flat panels, Joglekar said demand is just starting to pick up and while DRAM is a commodity, it is heading toward an up cycle, he said. Another aspect of Samsung's business that Joglekar likes is its handset division, which he said is performing well.
While the money manager declined to disclose which stocks he currently holds short positions, he did mention some he isn't positive on - such as Gap Inc. (GPS).
According to Joglekar, in addition to the company's financial problems, it simply doesn't have good merchandise. Earlier this month Gap's debt was downgraded to junk status by the three major rating agencies and the company reported a fourth-quarter loss.
"The stuff they have is not appealing," said Joglekar, adding that the discounting Gap has been doing since the holiday selling season, will hurt the company.
"It's doing a good job cost cutting, but that can only get you so far," he said.
Regarding specific sectors, the money manager said he has currently adopted a cautious stance on the telecom equipment industry, in part because of the slowdown in capital spending.
"Companies in the sector could do well, but as a general statement telecom equipment is still not going to be as strong as expected," said Joglekar.
While some industry pundits expect capital spending to increase in the next few quarters, Joglekar said he's cynical of that theory, which is why he's staying away from that sector. Companies making telecom equipment include Motorola Inc. (MOT), Lucent Technologies Inc. (LU) and JDS Uniphase Corp. (JDSU).
As for specific countries, the portfolio manager said the country to avoid is Japan, even though it has some "great" companies like Canon Inc. (CAJ), Sony Corp. (SNE) and Sharp Electronics Corp.
"Japan's economy is in a huge downturn. I don't see what will get it up," he said.
-By Donna Fuscaldo, Dow Jones Newswires; 201-938-5253; donna.fuscaldo@dowjones.com
Updated February 28, 2002 3:00 p.m. EST |
